Contents
Financial Highlights
1
A Message from the
President
2
SportiVITÀ
5
Management’s
Discussion & Analysis
6
Consolidated Balance
Sheets
8
Consolidated
Statements of Income
10
Consolidated
Statements of Changes
in Net Assets
11
Consolidated
Statements of Cash
Flows
12
Corporate Information
32
Report of Independent
Auditors
31
Notes to Consolidated
Financial Statements
Financial Highlights
(Millions of yen)
2005 2006 2007 2008 2009 2010
For the year:
Net sales ¥146,679 ¥171,036 ¥194,515 ¥226,174 ¥241,944 ¥224,395
Sports shoes 89,168 112,742 135,248 167,193 177,869 165,808
Sportswear 41,278 41,199 42,672 41,590 46,602 42,576
Sports equipment 16,233 17,095 16,595 17,391 17,472 16,010
Cost of sales 88,244 98,578 110,051 127,133 138,901 130,169
Selling, general and administrative expenses 48,540 56,014 64,216 75,647 80,415 76,643
Operating income 9,895 16,444 20,248 23,394 22,628 17,582
Income before income taxes and minority interests 10,753 17,367 23,998 21,671 19,735 18,309
Net income 7,006 13,806 13,878 13,095 13,085 8,326
At year-end:
Total net assets ¥ 58,450 ¥ 74,899 ¥ 93,165 ¥110,141 ¥ 98,263 ¥109,664
Total assets 122,588 140,615 154,959 186,065 174,922 184,774
Per share of common stock (in yen):
Net income ¥ 34.39 ¥ 69.02 ¥ 69.72 ¥ 65.82 ¥ 67.23 ¥ 43.90
Cash dividends 3.50 6.00 8.00 10.00 10.00 10.00
Total net assets 293.17 375.79 450.78 500.83 467.90 525.58
Ratios:
Operating income ratio (%) 6.7 9.6 10.4 10.3 9.4 7.8
Return on assets (ROA) (%) 5.8 10.5 9.4 7.7 7.2 4.6
Shareholders’ equity ratio (%) 47.7 53.3 57.9 53.5 50.7 53.9
Net Income
(Millions of yen)
’06 ’07 ’08 ’09 ’10
8 ,3 2 6 1 3 ,8 0 6 1 3 ,8 7 8 1 3 ,0 9 5 1 3 ,0 8 5
Net Sales by Geographic Area
Japan
106,839［9,837］ Other areas
19,830［861］
United States 53,039［3］ Europe
55,389［1］
(Millions of yen) ASICS Corporation and Consolidated Subsidiaries
Years ended March 31
Notes: 1. Net Sales by Geographic Area figures include the intersegment sales. The intersegment amount indicates in [ ]. 2. All the figures have been rounded off to the nearest millions of yen.
Net Sales
(Millions of yen)
’06 ’07 ’08 ’09 ’10
22 4,3 95 17 1,0 36 19 4,5 15 22 6,1 74 24 1,9 44
Net Sales by Product
Sports shoes 165,808 （73.9％） Sports equipment
16,010 （7.1％）
Sportswear 42,576 （19.0％）
Motoi Oyama
President and Representative Director
A year of more progress in strengthening our brand as a symbol for
outstanding running products in order to achieve sustained growth
and increase company value.
Overseas Performance Severely Impacted by the Yen’s Appreciation
In fiscal 2010, ended March 31, 2010, our consolidated performance was lower than in the previous fiscal year. The results were consolidated net sales of ¥224.4 billion, operating income of ¥17.6 billion, and net income of ¥8.3 billion. Despite a challenging operating environment, our overseas businesses started growing again. Orders started recovering in the fiscal year’s second half, but performance was generally weak in Japan. Furthermore, the yen’s appreciation significantly reduced yen translations of overseas sales and earnings. The results were declines in our total sales and earnings.
The yen’s appreciation had a negative effect on our performance in all three of our geographical segments. In the Americas, including Brazil, sales of running shoes remained strong. However, after conversion into yen, sales in this region increased only 0.2% (an increase of 11.1% using the previous fiscal year’s foreign exchange rate).
In Europe, sales of running shoes were brisk but performance was held down by exchange rates and slow sales of sportstyle shoes. The result was a 13.3% decline in sales (an increase of 1.9% using the previous fiscal year’s foreign exchange rates). Performance in the Asia-Pacific region benefited from strong sales of running shoes, particularly in Australia. However, sales were down 14.2% because of the negative effect of exchange rates. In March 2010, we began operations in India, a market where there are excellent prospects for growth.
Invigorating Operations in Japan Holds the Key to Growth
As the global economy starts to recover, overseas operations are beginning to grow again. As such, the need to rejuvenate our performance in Japan has become even greater. Personal consumption in Japan is indeed weak, yet we cannot blame the economy alone. Our inability to adequately promote the many advantages of ASICS products among Japanese consumers was also responsible for our weak performance in Japan.
A Message from the President
By using the resources of the ASICS Research Institute of Sport Science and the Design Center, the ASICS Group produces many value-added products that skillfully combine outstanding functions with attractive designs. I am very confident that these qualities give our products an edge over our competitors’ products. We will increase the volume of sales venues that we can supervise ourselves. This includes directly managed stores, franchised stores, and shop-in-shops. I believe this will allow us to reinvigorate our operations in Japan by creating sales areas that can adapt quickly to changes in our merchandising plans.
Reinforcing Our Brand Value, Which Underpins Our Company Value
In January 2008, the ASICS Group started promoting globally unified brand advertisements. As part of these activities, we were a prominent supporter of major urban marathons, such as the ING New York City Marathon and the Paris Marathon. These measures have significantly raised recognition of our brand outside Japan. Overseas operations have also benefited from our commitment to listening to customers throughout the world in order to supply products that reflect regional needs and preferences. Due to these measures, our overseas sales ratio was 58.4% in fiscal 2010. We are targeting Southeast Asia as well, where the population of runners is increasing rapidly. We are conducting extensive advertising and marketing activities with emphasis on support for the Singapore Marathon and other urban marathons. Our goal is to achieve more growth outside Japan by positioning ASICS as a widely recognized global brand.
Japan is also part of initiatives to reinforce our brand. We are using television commercials and other efficient advertising and marketing activities, sponsorship of the Tokyo Marathon and other events, as well as the July 2009 opening of the ASICS SPORTS MUSEUM. I believe that enhancing the profile of our brand in Japan will contribute to increasing our company value.
Strategic Objectives for 2010
ASICS is currently reinforcing and expanding business operations based on the ASICS Challenge Plan, a Groupwide strategy. However, we have decided to push back our goal of raising consolidated net sales to ¥300 billion to after fiscal 2012, ending March 31, 2012, due to the global economic weakness, the instability of the exchange market, and other challenges we face.
TOKYO MARATHON 2010
Globally unified brand advertisements in 2010 ASICS SPORTS MUSEUM
Our strategy for the product lineup is to achieve total growth in apparel and footwear. As for foorwear, which is a market sector where we are highly competitive, we will continue to create innovative, value-added products that competitors cannot match. At the same time, we plan to increase apparel sales by enlarging our presence in the sports casual category.
To reach our medium-term targets for performance, we announced the following strategic objectives for 2010. First is going back to the basics—production activities were the focus of our operations when ASICS was established. We are renewing our commitment to this stance in order to create outstanding products and services with excellence in terms of quality, performance, and designs. Second is improving productivity. We are conducting an exhaustive review of every aspect of our operations with a goal of establishing the best possible supply chain. This begins with product planning and includes manufacturing, distribution, and sales. Third is strengthening corporate governance and human resources. We will establish an effective governance framework based on a suitable system of internal controls. In addition, we plan to assemble an organization that is best suited to supporting the human resource cultivation and development of our workforce.
The ASICS Group operates on a global scale. Our objective as a global company is to achieve sustained growth in sales and earnings along with company value by continuing to expand overseas while rejuvenating operations in Japan. I ask for the support and understanding of shareholders as we take the necessary steps to accomplish this goal.
June 2010
Motoi Oyama,
President and Representative Director
A Message From the President
Top Impact Line
SportiVITÀ
The ASICS Group is taking many actions aimed at strengthening ASICS as a global running brand. Runners worldwide give high marks to our products, which incorporate technologies built on experience dating back to our inception, and we have earned a reputation as one of the top brands in Japan, the United States, Europe, the Asia-Pacific region, and other main areas we have entered.
In recent years, we have started operations in many emerging countries in Asia, Eastern Europe, South America, and other regions. In 2010, we began operations in India.
Onitsuka Tiger is a sport fashion brand of sports shoes that incorporate elements of athletic shoes, but are modernly and fashionably designed for daily use in a city as well. The brand is gaining popularity with the youth globally as a global brand originated in Japan, and we plan to open more of the stores.
With people worldwide becoming more health conscious, the ASICS Group will continue to target opportunities created by these needs to grow on a global scale.
ASICS Ranked 22nd in Japan’s Best Global Brands
ASICS was ranked in the top 30 for the second consecutive year in Japan’s Best Global Brands, which is produced by the international brand consulting firm Interbrand Corporation. The difficult economic climate caused declines in the rankings and scores of many Japanese companies. Nevertheless, the ASICS brand rose from number 26 to 22. This improvement reflects the global marathon boom as well as rising consumer needs involving the environment and rising health consciousness. The ASICS global brand strategy is another reason for the higher ranking. We are determined to continue increasing the value of the ASICS brand with the goal of joining the top 100 in the Best Global Brands ranking of Interbrand.
Gateway, Hong Kong (October 2009) Shangri-La, Philippines (January 2010) DONGSEONGRO, Korea (February 2010) LOTTE MYONGDONG, Korea (March 2010) Newly opened Onitsuka Tiger stores
0 30000 60000 90000 120000 150000
’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10
42 ,3 09 48 ,4 63 56 ,0 65 61 ,3 95 69 ,2 76 92 ,0 78 11 5,0 44 13 6,9 90 14 3,3
77 13
1
,1
0
3
Rapidly Growing in Markets Worldwide
ASICS STORE NEW YORK, United States (October 2009)
ASICS STORE TAIPEI, Taiwan
(February 2010)
Newly opened stores specializing in running shoes
Plaque awarded for the second consecutive year
Overseas Sales
Management’s Discussion & Analysis
Overview
In fiscal 2010, ended March 31, 2010, the global economy recovered at a moderate pace but remained negative. The Japanese economy also staged a steady recovery, but severe conditions continued due to deterioration in the employment situation, weak personal consumption, and other issues.
In the sporting goods industry, rising health
consciousness led to greater interest in sports. However, the business condition remained challenging because of the severe impact of consumer reluctance toward making expenditures.
Under these conditions, the ASICS Group took actions on a global scale to continue reinforcing the core running business. In addition, ASICS strengthened its product lineup by introducing products with outstanding functions and quality to increase sales in the apparel business.
In marketing activities, ASICS supplied products to many top athletes at the IAAF World Championships in Athletics Berlin 2009 and the Vancouver 2010 Olympic Winter Games in order to raise our corporate image and ASICS brand recognition. Furthermore, ASICS was an official sponsor of marathons in various countries such as the Tokyo Marathon 2010, New York City Marathon, Paris Marathon, and Gold Coast Airport Marathon, providing information and services to participating runners. In addition, ASICS continued its campaign which incorporates the “sound mind, sound body” corporate slogan.
To expand sales in North Europe, ASICS Skandinavia AS and subsidiaries of that company became consolidated
subsidiaries of ASICS. In addition, as flagship stores of the ASICS Group, ASICS STORE NEW YORK in the Americas, ASICS STORE TAIPEI in the Asia-Pacific region, and the ASICS Walking Shop in Japan were opened to strengthen the sales network.
To support the sound development of young people and promote the culture of sports, ASICS opened the ASICS SPORTS MUSEUM at its head office building in Kobe.
Performance Analysis
In fiscal 2010, consolidated net sales decreased 7.3% to ¥224,395 million. Sales in Japan decreased 5.4% to ¥93,292 million, as strong sales of running shoes and running wear were offset by weakness in the walking shoes and athletic wear categories. Overseas sales decreased 8.6% to ¥131,103 million, as strong sales of running shoes and running wear were offset by the effect of changes in foreign exchange rates and weak sales of sportstyle shoes in Europe.
By product, sales of sports shoes decreased 6.8% to ¥165,808 million. In Japan, sales of running shoes were brisk but walking shoes and other categories of shoes did not perform well. Overseas, sales of running shoes were strong, but sales overall were held down by foreign exchange rates and weak sales of sportstyle shoes. Sportswear sales decreased 8.6% to ¥42,576 million. In Japan, sales of running wear were strong, but athletic wear sales were sluggish. Overseas sportswear sales were negatively impacted by foreign exchange rates. Sales of sports equipment decreased 8.4% to ¥16,010 million
Gross Profit
(Billions of yen)
’06 ’07 ’08 ’09 ’10
72.5 84.5 99.0 94.2 103.0 Operating Income
(Billions of yen)
’06 ’07 ’08 ’09 ’10
16.4 20.2 23.4 17.6 22.6 Working Capital
(Billions of yen)
’06 ’07 ’08 ’09 ’10
53.7 61.1
80.7
88.5
because of generally sluggish sales and the negative effect of foreign exchange rates.
Gross profit decreased 8.6% to ¥94,225 million primarily due to the decline in sales and an increase in the cost of sales ratio overseas.
Selling, general and administrative expenses decreased 4.7% to ¥76,643 million. Reductions in overseas advertising and marketing expenses and the effect of foreign exchange rates were mainly responsible for this decline.
Operating income was down 22.3% to ¥17,582 million. Net other income was ¥727 million, compared to a loss of ¥2,893 million in the previous fiscal year. Despite a decline in interest income, there was a lower exchange loss, a decline in loss on revaluation on investments in securities, and a gain on redemption of investment in security. Net income declined 36.4% from the previous fiscal year to ¥8,326 million, due to a payment for income taxes for prior years and other items.
Financial Condition
At the end of fiscal 2010, total assets were ¥184,774 million, up 5.6%, total liabilities were ¥75,110 million, down 2.0%, and net assets were ¥109,664 million, up 11.6% from the previous fiscal year, respectively.
Cash Flows
Net cash provided by operating activities decreased ¥1,806 million to ¥16,982 million. Major sources of cash were income before income taxes and minority interests of ¥18,309 million, a ¥6,333 million decrease in inventories,
and depreciation and amortization of ¥3,559 million. The major use of cash was income taxes paid of ¥11,943 million.
Net cash used in investing activities decreased ¥9,182 million to ¥2,698 million. Major sources of cash were proceeds of ¥3,526 million from sales and redemption of investments in securities and ¥965 million from time deposits withdrawn. Major uses of cash were ¥3,010 million for purchases of property, plant and equipment, ¥2,021 million for acquisition of shares of consolidated subsidiaries resulting in initial consolidation, ¥1,094 million for purchases of investments in securities, and a ¥978 million net increase in securities included in short-term investments.
Net cash used in financing activities was ¥4,919 million compared with a positive cash flow of ¥1,222 million one year earlier. The major source of cash was proceeds of ¥1,131 million from long-term loans. Major uses of cash were a net decrease of ¥2,009 million in short-term bank loans, cash dividends paid to the Company’s shareholders of ¥1,903 million, and repayment of ¥1,348 million of long-term loans.
As a result, cash and cash equivalents at end of year increased by ¥11,202 million to ¥33,777 million.
Long-Term Debt
(Billions of yen)
’06 ’07 ’08 ’09 ’10
7.4
4.2 4.9
15.1 15.1
Total Net Assets
(Billions of yen)
’06 ’07 ’08 ’09 ’10
74.9 93.2
109.7
98.3 110.1
Total Assets
(Billions of yen)
’06 ’07 ’08 ’09 ’10
140.6 155.0
186.1 184.8
Consolidated Balance Sheets
ASICS Corporation and Consolidated Subsidiaries March 31, 2010 and 2009
Thousands of U.S. dollars Millions of yen (Note 1)
ASSETS 2010 2009 2010
Current assets:
Cash and deposits (Notes 4 and 15) ... ¥ 33,436 ¥ 23,419 $ 359,527
Short-term investments (Notes 4, 5 and 15) ... 3,130 1,318 33,656
Notes and accounts receivable (Note 4):
Trade ... 56,745 55,488 610,161
Less allowance for doubtful receivables ... (2,193) (1,531) (23,581)
Inventories (Note 6) ... 35,773 39,397 384,656
Deferred income taxes (Note 16) ... 4,460 5,015 47,957
Other current assets ... 4,636 4,719 49,849
Total current assets ... 135,987 127,825 1,462,225
Property, plant and equipment (Note 14):
Land ... 10,375 10,577 111,559
Buildings and structures ... 28,427 28,389 305,667
Machinery, equipment and vehicles ... 4,107 3,860 44,161
Tools, furniture and fixtures ... 8,618 8,622 92,667
Leased assets ... 1,001 689 10,763
Construction in progress ... 2,318 5 24,925
Less accumulated depreciation ... (29,388) (28,086) (316,000)
Property, plant and equipment, net ... 25,458 24,056 273,742
Intangible assets ... 6,007 2,880 64,591
Investments and other assets:
Investments in securities:
Unconsolidated subsidiaries and affiliates ... 111 85 1,194
Other (Notes 4 and 5) ... 6,912 8,562 74,323
Long-term loans receivable ... 632 736 6,796
Deferred income taxes (Note 16) ... 1,299 1,697 13,968
Other assets ... 9,844 10,642 105,849
Less allowance for doubtful accounts ... (1,476) (1,561) (15,871)
Total investments and other assets ... 17,322 20,161 186,259
Thousands of U.S. dollars Millions of yen (Note 1)
LIABILITIES AND NET ASSETS 2010 2009 2010
Current liabilities:
Short-term bank loans (Notes 4 and 7) ... ¥ 8,180 ¥ 9,708 $ 87,957
Current portion of long-term debt and lease obligations (Notes 4 and 7) ... 1,370 1,601 14,731
Notes and accounts payable (Note 4):
Trade ... 20,883 20,692 224,548
Construction ... 9 27 97
Accrued income taxes (Note 16) ... 1,590 2,644 17,097
Accrued expenses ... 6,886 7,715 74,043
Deferred income taxes (Note 16) ... 1 8 11
Other current liabilities ... 8,555 7,611 91,989
Total current liabilities ... 47,474 50,006 510,473
Long-term liabilities:
Long-term debt and lease obligations (Notes 4 and 7) ... 15,118 15,062 162,559
Accrued retirement benefits for employees (Note 8)... 7,628 7,365 82,022
Deferred income taxes (Note 16) ... 980 319 10,538
Other long-term liabilities ... 3,910 3,907 42,043
Total long-term liabilities ... 27,636 26,653 297,162
Net assets:
Shareholders’ equity (Note 12): Common stock:
Authorized shares—790,000,000 shares at March 31, 2010 and 2009
Issued shares —199,962,991 shares at March 31, 2010 and 2009 ... 23,972 23,972 257,763
Capital surplus ... 17,182 17,182 184,753
Retained earnings (Note 19) ... 71,658 64,937 770,516
Less treasury stock, at cost
(10,331,996 shares at March 31, 2010 and 10,293,321 shares at March 31, 2009) ... (7,780) (7,749) (83,656)
Total shareholders’ equity ... 105,032 98,342 1,129,376
Valuation and translation adjustments:
Unrealized holding gain on securities (Note 5) ... 1,286 529 13,828
Unrealized deferred loss on hedges (Note 10) ... (233) (82) (2,505)
Revaluation reserve for assets of foreign subsidiaries (Note 13) ... 565 — 6,075
Translation adjustments ... (6,984) (10,042) (75,097)
Total valuation and translation adjustments ... (5,366) (9,595) (57,699)
Minority interests ... 9,998 9,516 107,505
Total net assets ... 109,664 98,263 1,179,182
Total liabilities and net assets ... ¥184,774 ¥174,922 $1,986,817
Consolidated Statements of Income
ASICS Corporation and Consolidated Subsidiaries Years ended March 31, 2010 and 2009
Thousands of U.S. dollars Millions of yen (Note 1)
2010 2009 2010
Net sales (Note 18) ... ¥224,395 ¥241,944 $2,412,849 Cost of sales ... 130,170 138,901 1,399,677
Gross profit ... 94,225 103,043 1,013,172
Selling, general and administrative expenses (Note 11) ... 76,643 80,415 824,118
Operating income (Note 18) ... 17,582 22,628 189,054
Other income (expenses):
Interest income ... 439 691 4,720
Dividend income ... 620 445 6,667
Interest expense ... (481) (615) (5,172)
Exchange loss ... (655) (1,831) (7,043)
Gain on sales of investments in securities (Note 5) ... 45 32 484
Gain on redemption of investment in security ... 333 — 3,581
Reversal of allowance for doubtful accounts ... 119 — 1,280
Loss on valuation of derivatives ... — (545) —
Loss on sales or disposal of property, plant and equipment and other, net... (74) (95) (796)
Loss on sales of investments in securities (Note 5) ... (19) (81) (204)
Loss on revaluation of investments in securities (Note 5) ... (182) (761) (1,957)
Loss on redemption of investment in security ... (27) — (290)
Loss on write-down of golf club membership ... (34) — (366)
Loss on impairment of fixed assets (Note 14) ... (81) (125) (871)
Loss on change in employees’ retirement benefit plan ... — (243) —
Other, net ... 724 235 7,784
727 (2,893) 7,817
Income before income taxes and minority interests ... 18,309 19,735 196,871
Income taxes (Note 16):
Current ... 6,123 8,000 65,839
Prior years ... 1,937 — 20,828
Deferred ... 1,066 (2,432) 11,462
9,126 5,568 98,129
Income before minority interests ... 9,183 14,167 98,742
Minority interests ... 857 1,082 9,215
Net income ... ¥ 8,326 ¥ 13,085 $ 89,527
Consolidated Statements of Changes in Net Assets
ASICS Corporation and Consolidated Subsidiaries Years ended March 31, 2010 and 2009
Millions of yen
Revaluation Number of Unrealized Unrealized reserve for
issued Treasury holding deferred assets of
shares of Common Capital Retained stock, gain (loss) gain (loss) foreign Translation Minority Total common stock stock surplus earnings at cost on securities on hedges subsidiaries adjustments interests net assets
Balance at March 31, 2008 ... 199,962,991 ¥23,972 ¥17,182 ¥54,214 ¥ (704) ¥ 1,958 ¥(689) ¥ — ¥ 3,688 ¥10,520 ¥110,141 Change in accounting policies of
overseas subsidiaries ... — — (373) — — — — — — (373) Dividends ... — — — (1,989) — — — — — — (1,989) Net income ... — — — 13,085 — — — — — — 13,085 Net change in treasury stock... — — — — (7,045) — — — — — (7,045) Other changes ... — — — — — (1,429) 607 — (13,730) (1,004) (15,556)
Balance at March 31, 2009 ... 199,962,991 23,972 17,182 64,937 (7,749) 529 (82) — (10,042) 9,516 98,263 Dividends ... — — — (1,896) — — — — — — (1,896) Changes in scope of
consolidation ... — — — 245 — — — 611 — — 856 Reversal of revaluation reserve for
assets of foreign subsidiaries .. — — — 46 — — — (46) — — 0
Net income ... — — — 8,326 — — — — — — 8,326
Purchases of treasury stock ... — — — — (32) — — — — — (32)
Sales of treasury stock ... — — 0 — 1 — — — — — 1
Other changes ... — — — — — 757 (151) — 3,058 482 4,146 Balance at March 31, 2010 ... 199,962,991 ¥23,972 ¥17,182 ¥71,658 ¥(7,780) ¥ 1,286 ¥(233) ¥565 ¥ (6,984) ¥ 9,998 ¥109,664
Thousands of U.S. dollars (Note 1)
Revaluation Unrealized Unrealized reserve for Treasury holding deferred assets of
Common Capital Retained stock, gain on loss on foreign Translation Minority Total stock surplus earnings at cost securities hedges subsidiaries adjustments interests net assets
Balance at March 31, 2009 ... $257,763 $184,753 $698,247 $ (83,323) $ 5,688 $ (882) $ — $(107,978) $102,323 $1,056,591 Dividends ... — — (20,387) — — — — — — (20,387) Changes in scope of consolidation ... — — 2,634 — — — 6,570 — — 9,204 Reversal of revaluation reserve for
Consolidated Statements of Cash Flows
ASICS Corporation and Consolidated Subsidiaries Years ended March 31, 2010 and 2009
Thousands of U.S. dollars Millions of yen (Note 1)
2010 2009 2010
Operating activities:
Income before income taxes and minority interests ... ¥ 18,309 ¥ 19,735 $ 196,871
Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities:
Depreciation and amortization ... 3,559 3,040 38,269
Increase (decrease) in allowance for doubtful accounts ... 582 (209) 6,258
Increase in accrued retirement benefits for employees ... 501 289 5,387
Loss on revaluation of investments in securities ... 182 761 1,957
(Gain) loss on sales of investments in securities, net ... (26) 49 (280)
Gain on redemption of investments in securities, net ... (306) — (3,291)
Interest and dividend income ... (1,059) (1,136) (11,387)
Interest expense ... 481 615 5,172
Foreign exchange loss, net ... 122 764 1,312
Loss on sales or disposal of property, plant and equipment and other, net ... 74 95 796
Other, net ... (136) 553 (1,461)
Decrease (increase) in operating assets:
Notes and accounts receivable ... 292 (964) 3,140
Inventories ... 6,333 (476) 68,097
Other operating assets ... 1,832 136 19,699
(Decrease) increase in operating liabilities:
Notes and accounts payable ... (1,688) 1,112 (18,151)
Accrued consumption taxes ... 157 65 1,688
Other operating liabilities ... (831) (947) (8,936)
Subtotal ... 28,378 23,482 305,140
Interest and dividends received ... 1,026 1,106 11,032
Interest paid ... (479) (612) (5,151)
Income taxes refunded ... — 1,284 —
Income taxes paid ... (11,943) (6,472) (128,419)
Net cash provided by operating activities ... 16,982 18,788 182,602 Investing activities:
Purchases of time deposits included in short-term investments ... (200) (1,198) (2,151)
Proceeds from time deposits withdrawn ... 965 1,500 10,376
Purchases of property, plant and equipment ... (3,010) (5,252) (32,366)
Proceeds from sales of property, plant and equipment ... 73 58 785
Purchases of intangible assets ... (338) (351) (3,634)
Net (increase) decrease in securities included in short-term investments ... (978) 17 (10,516)
Purchases of investments in securities ... (1,094) (3,600) (11,763)
Proceeds from sales and redemption of investments in securities ... 3,526 2,591 37,914
Purchases of investments in subsidiaries ... — (70) —
Purchase of investment in securities of a subsidiary ... (196) (171) (2,108)
Payment for acquisition of shares of consolidated subsidiaries resulting in
initial consolidation (Note 15) ... (2,021) — (21,731)
Payments for transfer of a business ... — (5,454) —
Net decrease in short-term loans receivable included in other current assets ... 14 8 151
Long-term loans receivable made ... (34) (127) (366)
Collection of long-term loans receivable ... 96 71 1,032
Other, net ... 499 98 5,366
Net cash used in investing activities ... (2,698) (11,880) (29,011) Financing activities:
Net (Decrease) increase in short-term bank loans ... (2,009) 2,420 (21,602)
Proceeds from long-term loans ... 1,131 — 12,161
Repayment of long-term loans ... (1,348) (1,752) (14,495)
Proceeds from issuance of bonds ... — 10,715 —
Purchases of treasury stock ... (32) (7,045) (344)
Proceeds from sales of treasury stock ... 1 — 11
Purchase of treasury stock by a subsidiary ... — (593) —
Proceeds from stock issuance to minority shareholders ... 4 126 43
Payments under lease obligations ... (343) (265) (3,688)
Cash dividends paid to the Company’s shareholders ... (1,903) (1,987) (20,462)
Cash dividends paid to minority shareholders of consolidated subsidiaries ... (420) (397) (4,516)
Net cash (used in) provided by financing activities ... (4,919) 1,222 (52,892) Effect of exchange rate changes on cash and cash equivalents ... 1,837 (5,062) 19,753 Net increase in cash and cash equivalents ... 11,202 3,068 120,452 Cash and cash equivalents at beginning of year ... 22,575 19,507 242,742 Cash and cash equivalents at end of year (Note 15) ... ¥ 33,777 ¥ 22,575 $ 363,194
Notes to Consolidated Financial Statements
ASICS Corporation and Consolidated Subsidiaries Years ended March 31, 2010 and 2009
Basis of Preparation
1
ASICS Corporation (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with accounting principles generally accepted in Japan, and its overseas subsidiaries maintain their books of account in conformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for convenience and, as a matter of arithmetic computation only, at ¥93=U.S.$1.00, the approximate rate of
exchange prevailing on March 31, 2010. This translation should not be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
Summary of Significant Accounting Policies
2
(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies which it controls directly or indirectly. All significant intercompany transactions and accounts have been eliminated in consolidation. The overseas consolidated subsidiaries are consolidated on the basis of fiscal years ending December 31, a date which differs from the balance sheet date of the Company. As a result, adjustments have been made for any significant intercompany transactions which took place during the period between the year end of these overseas consolidated subsidiaries and the year end of the Company.
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if applicable. The difference, not significant in amount, between the cost of investments in subsidiaries and the equity in their net assets at the respective dates of acquisition is amortized over a period of 5 years on a straight-line basis, except that immaterial amounts are charged to income as incurred.
Other affiliates are not significant in terms of their net income or loss, and retained earnings. Accordingly, these other affiliates have not been accounted for by the equity method. Investments in such affiliates are stated at cost. Certain subsidiaries were excluded from the scope of consolidation because the effect of their sales, net income or loss, total assets and retained earnings on the accompanying consolidated financial statements was immaterial.
(b) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance sheet date and gain or loss on each translation is credited or charged to income. Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effect at the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period in which the gain or loss is recognized for financial reporting purposes.
The financial statements of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance sheet date, except that the components of net assets excluding minority interests are translated at their historical exchange rates.
(c) Cash and cash equivalents
For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on demand, and short-term investments which are readily convertible into cash subject to an insignificant risk of any change in their value and which were purchased with an original maturity of three months or less.
(d) Securities
(e) Inventories
Inventories are principally stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method.
(f) Property, plant and equipment (except for leased assets under finance leases)
The Company and its domestic consolidated subsidiaries compute depreciation of property, plant and equipment by the declining-balance method over the estimated useful lives of the respective assets, except that the straight-line method is applied to buildings (other than structures attached to the buildings) acquired on or subsequent to April 1, 1998. Overseas consolidated subsidiaries compute depreciation of property, plant and equipment by the straight-line method over the estimated useful lives of the respective assets.
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income as incurred.
The principal estimated useful lives used for calculating depreciation are as follows: Buildings and structures 3 to 50 years
Machinery, equipment and vehicles 2 to 17 years Tools, furniture and fixtures 2 to 20 years
(g) Allowance for doubtful receivables
The Company and its domestic consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on their historical experience of bad debts on ordinary receivables plus an additional estimate of probable specific bad debts from customers experiencing financial difficulties.
The overseas consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on probable specific bad debts from their customers.
(h) Retirement benefits for employees
Accrued retirement benefits for employees are provided principally at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as adjusted for unrecognized actuarial gain or loss. The retirement benefit obligation is attributed to each period by the straight-line method over the estimated remaining years of service of the eligible employees.
Net retirement benefit obligation at transition is amortized by the straight-line method over a period of 15 years. Past service cost is amortized by the straight-line method over a period within the estimated average remaining years of service of the eligible employees. Such amortization is deducted from retirement benefit expenses.
Actuarial gain or loss is amortized in the year following the year in which the gain or loss is recognized principally by the straight-line method over a period which falls within the estimated average remaining years of service of the eligible employees. Certain consolidated subsidiaries recognize actuarial gain or loss when incurred.
(Supplementary Information)
Effective February 28, 2009, a domestic consolidated subsidiary changed employees’ retirement benefit plan from a tax-qualified pension plan to a defined contribution plan. Upon transition, “Guidance on Accounting for Transfers between Retirement Benefit Plans” (ASBJ Guidance No. 1) was applied.
As a result of this change, loss on change in employees’ retirement benefit plan in the amount of ¥243 million was recorded as a component of other expenses in the consolidated statement of income for the year ended March 31, 2009.
(i) Leases
Finance leases other than those that are deemed to transfer the ownership of the leased property to the lessees, are depreciated using the straight-line method over the lease term with no residual value.
However, the Company and its domestic consolidated subsidiaries account for finance lease transactions that do not transfer the ownership of the leased property to the lessees in the same manner as operating leases if the initial transactions were entered into on or before March 31, 2008.
(j) Research and development costs and intangible assets (except for leased assets under finance leases)
Research and development costs are charged to income as incurred. Expenditures relating to computer software developed for internal use are charged to income as incurred, except if the software is expected to contribute to the generation of future income or to cost savings. Such expenditures are capitalized as assets and amortized by the straight-line method over their respective estimated useful lives, generally a period of 5 years.
(k) Income taxes
Deferred income taxes are provided for temporary differences between the balances of assets and liabilities reported for financial purposes and the corresponding balances for tax reporting purposes.
(l) Derivatives and hedging activities
Derivatives positions are carried at fair value with any changes in unrealized gain or loss charged or credited to income, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets. Receivables and payables hedged by qualified forward foreign exchange contracts and currency options are translated at the corresponding foreign exchange contract rates. Interest-rate swaps which meet certain conditions are accounted for as if the interest rates applied to the swaps had originally applied to the underlying debt.
(m) Distribution of retained earnings
Under the Corporation Law of Japan (the “Law”), the distribution of retained earnings with respect to a given financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of the financial period. The accounts for that period do not, therefore, reflect such distributions. Refer to Note 19.
(n) Bond issuance costs
Bond issuance costs are charged to income as incurred.
Effective the year ended March 31, 2010, the Company and its domestic consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)” (ASBJ Statement No. 19 issued on July 31, 2008). The effect of the adoption of this accounting standard on operating results for the year ended March 31, 2010 was immaterial.
Effective the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries adopted
“Accounting Standard for Measurement of Inventories” (Accounting Standards Board of Japan (ASBJ) Statement No. 9 issued on July 5, 2006). The effect of the adoption of this accounting standard on operating results for the year ended March 31, 2009 was immaterial.
On March 30, 2007, the Accounting Standards Board of Japan revised “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13) and “Guidance on Accounting Standard for Lease Transactions” (ASBJ Statement No. 16). The new accounting standards require that all finance lease transactions must be capitalized. The Company and its domestic consolidated subsidiaries adopted the new accounting standards effective the year ended March 31, 2009, and leased property is capitalized. The effect of the adoption of this accounting standard on operating results for the year ended March 31, 2009 was immaterial.
Previously, the Company and its domestic consolidated subsidiaries accounted for finance lease transactions other than those which transferred the ownership of the leased property to the lessees in the same manner as operating leases. Effective the year ended March 31, 2009, the Company and its overseas consolidated subsidiaries adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ PITF No. 18, May 17, 2006). The effects of this adoption on the consolidated operating results for the year ended March 31, 2009 and on the consolidated retained earnings at the beginning of the year were immaterial.
(Supplementary information)
Effective the year ended March 31, 2010, the Company and its consolidated subsidiaries have adopted “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 issued on March 10, 2008) and (Implementation)
“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 issued on March 10, 2008). Effective the year ended March 31, 2010, the Company has adopted “Accounting Standard for Disclosures about
Fair Value of Investment and Rental Property” (ASBJ Statement No. 20 issued on November 28, 2008) and “Guidance on Accounting Standard for Disclosure about Fair Value of Investment and Rental Property” (ASBJ Guidance No. 23 issued on November 28, 2008). However, the related disclosure has been omitted because the fair value of investment and rental property as of March 31, 2010 was immaterial.
Effective the year ended March 31, 2009, the Company adopted “Accounting Standard for Related Party Disclosures” (ASBJ Statement No. 11 issued on October 17, 2006) and its implementation guidance, “Guidance on Accounting Standard for Related Party Disclosures” (ASBJ Guidance No. 13 issued on October 17, 2006).
Financial Instruments
4
(a) Status of financial instruments
In consideration of plans for capital investment, the Company and its consolidated subsidiaries (collectively the “Group”) raise funds by bank borrowings and bonds issuance. The Group manages temporary fund surpluses princi-pally through liquid financial assets. Furthermore, the Group raises short-term capital through bank borrowings. The Group uses derivatives for the purpose of reducing risk and does not enter into derivatives for speculative purposes. Trade receivables, notes and accounts receivables, are exposed to credit risk in relation to customers. In addition, the Group is exposed to foreign currency exchange risk arising from trade receivables denominated in foreign curren-cies; however, forward foreign currency exchange contracts are arranged to reduce the risk.
Marketable securities and investment securities are exposed to market risk. Those securities are mainly composed of the shares of common stock of other companies with which the Group has business relationships.
Substantially all trade payables, trade notes and accounts payable, have payment due dates within 4 months. Although a portion of payables are exposed to foreign currency exchange risk arising from those payables denomi-nated in foreign currencies, forward foreign currency exchange contracts are arranged to reduce the risk.
Loans and bonds are taken out principally for the purpose of making capital investments and other business activi-ties. The repayment dates of the long-term debt extend up to 7 years from the balance sheet date. Although a por-tion of the debt is exposed to interest rate fluctuapor-tion risk, the Group undertakes interest rate swap transacpor-tions as a hedging instrument.
Regarding derivatives, the Group enters into forward foreign currency exchange contracts to reduce the foreign currency exchange risk mainly on the payables denominated in foreign currencies resulting from importing products within the actual demand for foreign currency exchange. The Group also enters into interest rate swap transactions to reduce fluctuation risk deriving from interest payable for long-term loans and bonds.
Regarding trade receivables, each related division monitors the credit worthiness of their main customers periodi-cally, and monitors due dates and outstanding balances by customer. In addition, the Group is making efforts to iden-tify and mitigate risks of bad debt from customers who have financial difficulties.
In accordance with internal policies “Policies of Administrative Authority,” the Group only acquires debt securities held for investment purposes with high credit ratings. Accordingly, the Group believes that the credit risk deriving from such debt securities is insignificant.
The Group also believes that the credit risk of derivatives is insignificant as the Group enters into derivative transac-tions only with international financial institutransac-tions with sound credit profiles.
In conducting derivative transactions, the division in charge of each derivative transaction follows the internal poli-cies “Polipoli-cies on Derivative Transactions” and “Polipoli-cies of Administrative Authority,” which set forth delegation of authority and segregation of duties related to derivative transactions. The Accounting and Financing Department conducts and manages derivative transactions and segregates duties of execution and management of transactions to separate personnel and management who are each responsible for transactions, positions and operations. Actual transaction data are regularly submitted to top management for their review.
For short-term investments and investments in securities, the Group periodically reviews the fair value of such finan-cial instruments and the finanfinan-cial position of the issuers. In addition, the Group continuously evaluates whether or not security investments should be maintained, taking into account their fair value and relationships with the issuers. Certain subsidiaries that enter into derivative transactions or buy/sell marketable securities and investment securi-ties also follow internal policies and base transactions are overseen and reviewed by management departments of these subsidiaries.
Based on a report from each division, the Group prepares and updates its cash flow plans on a timely basis and maintains solvency to manage liquidity risk.
(b) Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31, 2010 and unrealized gains are shown in the following table. The table does not include financial instruments for which it is extremely difficult to determine the fair value.
Millions of yen Thousands of U.S. dollars
2010 2010
Carrying value
Estimated fair value
Unrealized gain
Carrying value
Estimated fair value
Unrealized gain Assets:
Cash and deposits ¥33,436 ¥33,436 ¥— $ 359,527 $ 359,527 $ —
Notes and accounts receivable ... 56,745 610,161
Less allowance for doubtful
receivables ... (2,193) (23,581)
54,552 54,552 — 586,580 586,580 —
Short-term investments and investments in securities:
Other investment securities ... 9,864 9,864 — 106,064 106,064 —
Total assets ... ¥97,852 ¥97,852 ¥— $1,052,171 $1,052,171 $ —
Liabilities:
Notes and accounts payable ... ¥20,883 ¥20,883 ¥— $ 224,548 $ 224,548 $ —
Short-term bank loans ... 9,238 9,238 — 99,333 99,333 —
Bonds ... 11,000 11,047 47 118,280 118,785 505
Long-term loans ... 3,451 3,456 5 37,108 37,162 54
Total liabilities ... ¥44,572 ¥44,624 ¥52 $ 479,269 $ 479,828 $559
Derivative transactions ¥ (2,699) ¥ (2,699) ¥— $ 29,022 $ 29,022 $ —
The value of assets and liabilities arising from derivatives is a net value, and the amount in parentheses represents liability position.
Since cash and deposits, and notes and accounts receivable are settled in a short period of time, their carrying value approximates the fair value.
The fair value of equity securities are based on quoted market prices. The fair value of debt securities is based on either quoted market prices or the prices provided by the financial institutions making markets in these securities. Since notes and accounts payable, and short-term bank loans are settled in a short period of time, their carrying value approximates the fair value.
The fair value of bonds are based on the present value of the total of principal and interest discounted by the inter-est rate determined taking into account the remaining period for each bond and the current credit risk.
The fair value of long-term loans based on the present value of the total of principal and interest discounted by the interest rate to be applied if incremental borrowings were entered into.
The carrying value of other securities without determinable market value at March 31, 2010 is presented as follows:
Millions of yen Thousands ofU.S. dollars
2010 2010
The redemption schedule for monetary claims and investments by maturity date at March 31, 2010 are as follows:
Millions of yen Thousands of U.S. dollars
2010 2010
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through
10 years
Due after 10 years
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through
10 years
Due after 10 years Cash and deposits ... ¥33,436 ¥ — ¥ — ¥ — $359,527 $ — $ — $ —
Notes and accounts
receivable ... 56,745 — — — 610,161 — — —
Short-term investments and investment in securities Debt securities:
Corporate bonds ... — 150 141 — — 1,613 1,516 —
Other ... 1,395 — — — 15,000 — — —
Other ... — — — 100 — — — 1,075
¥91,576 ¥150 ¥141 ¥100 $984,688 $1,613 $1,516 $1,075
Short-Term Investments and Investments in Securities
5
Information regarding other securities with determinable market value at March 31, 2010 and 2009 is summarized as follows:
Millions of yen Thousands of U.S. dollars
2010 2009 2010
Carrying Acquisition Unrealized Carrying Acquisition Unrealized Carrying Acquisition Unrealized value costs gain (loss) value costs gain (loss) value costs gain (loss)
Securities whose carrying value exceeds their acquisition costs:
Equity securities ... ¥4,615 ¥2,750 ¥1,865 ¥2,526 ¥1,554 ¥ 972 $ 49,624 $29,570 $20,054
Debt securities:
Corporate bonds... 1,602 1,538 64 27 24 3 17,226 16,538 688
Other ... 631 433 198 550 396 154 6,784 4,655 2,129
Subtotal... 6,848 4,721 2,127 3,103 1,974 1,129 73,634 50,763 22,871
Securities whose carrying value does not exceed their acquisition costs:
Equity securities ... 937 1,069 (132) 2,152 2,435 (283) 10,075 11,495 (1,420)
Debt securities:
Corporate bonds... 465 480 (15) 2,589 2,595 (6) 5,000 5,161 (161)
Other ... 1,614 1,674 (60) 526 580 (54) 17,355 18,000 (645)
Subtotal... 3,016 3,223 (207) 5,267 5,610 (343) 32,430 34,656 (2,226)
Total ... ¥9,864 ¥7,944 ¥1,920 ¥8,370 ¥7,584 ¥ 786 $106,064 $85,419 $20,645
The total amounts of gain and loss on sales of other securities included in short-term investments and investments in securities for the years ended March 31, 2010 and 2009 are summarized as follows:
Thousands of Millions of yen U.S. dollars
2010 2009 2010
Total sales ... ¥451 ¥745 $4,849
Inventories
6
The following is a summary of inventories at March 31, 2010 and 2009:
Thousands of Millions of yen U.S. dollars
2010 2009 2010
Finished products . . . ¥34,431 ¥37,968 $370,226
Work in process ... 305 332 3,280
Raw materials and supplies ... 1,037 1,097 11,150
¥35,773 ¥39,397 $384,656
The average annual interest rates on short-term bank loans were 1.1% and 2.7% at March 31, 2010 and 2009, respectively. Long-term debt and lease obligations at March 31, 2010 and 2009 consisted of the following:
Thousands of Millions of yen U.S. dollars
2010 2009 2010
1.35% yen unsecured bonds, due 2016... ¥ 5,000 ¥ 5,000 $ 53,763
1.32% yen unsecured bonds, due 2016... 3,000 3,000 32,258
1.45% yen unsecured bonds, due 2016... 3,000 3,000 32,258
Unsecured loans primarily from banks, due 2010 through 2017,
at interest rates ranging from 0.8% to 5.3% ... 4,509 4,718 48,484
Lease obligations... 979 945 10,527
16,488 16,663 177,290
Current portion of long-term debt and lease obligations ... (1,370) (1,601) (14,731)
¥15,118 ¥15,062 $162,559
The aggregate annual maturities of long-term debt and lease obligations subsequent to March 31, 2010 are summarized as follows:
Thousands of
Years ending March 31, Millions of yen U.S. dollars
2011 ... ¥ 1,370 $ 14,731
2012 ... 789 8,484
2013 ... 2,545 27,366
2014 ... 237 2,548
2015 ... 92 989
2016 and thereafter ... 11,455 123,172
¥16,488 $177,290
7
Short-Term Bank Loans and Long-Term Debt and Lease Obligations
The Company recorded an impairment loss of ¥182 million ($1,957 thousand) and ¥761 million on investments in securities classified as other securities for the years ended March 31, 2010 and 2009, respectively.
The Company and its domestic consolidated subsidiaries have defined benefit pension plans, i.e., welfare pension fund plans (“WPFPs”), tax-qualified pension plans and lump-sum payment plans, covering substantially all employees who are entitled to lump-sum or annuity payments, the amounts of which are determined by reference to each retiree’s position and basic salary at termination, as well as length of service and certain other factors. Certain domestic consolidated subsidiaries have adopted the smaller enterprise retirement allowance mutual aid plan as their defined multi-employer pension plan. The following table sets forth the funded and accrued status of the defined retirement benefit plans of the Company and its domestic consolidated subsidiaries at March 31, 2010 and 2009:
Thousands of Millions of yen U.S. dollars
2010 2009 2010
Retirement benefit obligation ... ¥(17,091) ¥(16,896) $(183,774)
Plan assets at fair value... 7,177 5,928 77,172
Unfunded retirement benefit obligation ... (9,914) (10,968) (106,602)
Unrecognized net retirement benefit at transition ... 1,083 1,288 11,645
Unrecognized actuarial loss... 2,608 4,006 28,043
Prepaid retirement benefits... (1,405) (1,691) (15,108)
Accrued retirement benefits... ¥ (7,628) ¥ (7,365) $ (82,022)
As permitted under the accounting standard for retirement benefits, domestic consolidated subsidiaries calculate their retirement benefit obligation principally by simplified methods.
The components of retirement benefit expenses for the years ended March 31, 2010 and 2009 are outlined as follows:
Thousands of Millions of yen U.S. dollars
2010 2009 2010
Service cost... ¥ 922 ¥1,013 $ 9,914
Interest cost... 274 315 2,946
Expected return on plan assets ... (99) (159) (1,065)
Amortization of net retirement benefit obligation at transition ... 127 127 1,366
Recognized net actuarial loss ... 544 344 5,849
Recognized past service cost... — (586) —
Other ... 32 7 345
Retirement benefit expenses ... ¥1,800 ¥1,061 $19,355
The retirement benefit expenses of domestic consolidated subsidiaries have been calculated by simplified methods and are included in service cost in the above table.
For the year ended March 31, 2010, “Other” in the above table consisted of payments to defined benefit pension plans and the smaller enterprise retirement allowance mutual aid plan. For the year ended March 31, 2009, “Other” consisted of payments to the smaller enterprise retirement allowance mutual aid plan and additional termination benefits to employees.
The assumptions used in accounting for the retirement benefit plans for the years ended March 31, 2010 and 2009 are as follows:
2010 2009
Discount rates ... 1.5–2.0% 1.5–2.0% Expected rates of return on plan assets... 2.0% 2.0–2.5%
The Company and its consolidated subsidiaries lease machinery, equipment and vehicles; tools, furniture and fixtures; and other assets. The following pro forma amounts represent the acquisition costs (including the interest portion), accumulated depreciation and net book value of the leased assets at March 31, 2010 and 2009, whose initial transaction date was before the adoption of the revised accounting standard related to lease transactions. The amounts would have been reflected in the accompanying consolidated balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as operating leases:
Millions of yen Thousands of U.S. dollars
2010 2009 2010
Acquisition costs
Accumulated depreciation
Accumulated impairment
loss
Net book value
Acquisition costs
Accumulated depreciation
Accumulated impairment
loss
Net book value
Acquisition costs
Accumulated depreciation
Accumulated impairment
loss
Net book value Machinery,
equipment
and vehicles ... ¥ 70 ¥ 51 ¥— ¥ 19 ¥ 92 ¥ 54 ¥ — ¥ 38 $ 753 $ 548 $ — $ 205
Tools, furniture
and fixtures .... 1,133 765 99 269 2,060 1,296 104 660 12,183 8,226 1,065 2,892
Other assets ... 513 333 — 180 691 390 — 301 5,516 3,581 — 1,935
Total ... ¥1,716 ¥1,149 ¥99 ¥468 ¥2,843 ¥1,740 ¥104 ¥999 $18,452 $12,355 $1,065 $5,032
Lease payments relating to finance leases accounted for as operating leases amounted to ¥517 million ($5,559 thousand) and ¥617 million for the years ended March 31, 2010 and 2009, respectively. These amounts were equal to the depreciation of the leased assets computed by the straight-line method over the respective lease terms assuming a nil residual value. Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2010 under finance leases other than those which transfer the ownership of the leased assets to the Company and its consolidated subsidiaries as of March 31, 2010 are summarized as follows:
Thousands of Millions of yen U.S. dollars
Due within one year ... ¥311 $3,344
Due after one year . . . 256 2,753
Total ... ¥567 $6,097
The open currency-related derivatives positions not designated as hedging instruments at March 31, 2010 and 2009 are as follows:
Millions of yen
2010 2009 Classification Transaction Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized gain (loss) Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized loss Over-the-counter transactions Currency options: Selling:
USD ¥10,784 ¥ 8,348 ¥(1,304) ¥ (725) ¥13,054 ¥10,784 ¥ (559) ¥ (519)
EUR 1,142 — (39) 53 — — — —
Buying:
USD 4,961 3,787 146 (232) 6,162 4,961 312 (160)
EUR 1,142 — 78 (8) — — — —
Currency swaps:
USD 10,829 10,829 (1,139) (1,139) 12,029 12,029 (801) (801)
Forward foreign exchange contract: Selling:
USD — — — — 66 — (3) (3)
Buying:
USD 2,413 913 (122) (122) 3,303 1,445 (33) (33)
Total ¥31,271 ¥23,877 ¥(2,380) ¥(2,173) ¥34,614 ¥29,219 ¥(1,084) ¥(1,516)
Thousands of U.S. dollars
2010 Classification Transaction Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized gain (loss) Over-the-counter transactions Currency options: Selling:
USD $115,957 $ 89,764 $(14,022) $ (7,796)
EUR 12,280 — (419) 570
Buying:
USD 53,344 40,720 1,570 (2,495)
EUR 12,280 — 839 (86)
Currency swaps:
USD 116,441 116,441 (12,247) (12,247)
Forward foreign exchange contract: Buying:
USD 25,946 9,817 (1,312) (1,312)
Total $336,248 $256,742 $(25,591) $(23,366)
Fair value is based on the prices obtained from financial institutions.
Millions of yen 2009 Classification Transaction Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized loss Over-the-counter
transaction Equity derivative ¥1,525 ¥— ¥(734) ¥(734)
Fair value is based on the prices obtained from financial institutions.
The open interest-related derivative position not designated as hedging instruments at March 31, 2010 and 2009 are as follows:
Millions of yen
2010 2009 Classification Transaction Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized loss Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized loss Over-the-counter transaction
Interest rate option:
Selling floor ¥1,500 ¥1,500 ¥(19) ¥(19) ¥1,500 ¥1,500 ¥(12) ¥(12)
Thousands of U.S. dollars
2010 Classification Transaction Contract value (notional principal amount) Portion in excess of 1 year in contract value Estimated fair value Unrealized loss Over-the-counter transaction
Interest rate option:
Selling floor $16,129 $16,129 $(204) $(204)
